What Your Business Can Learn From Netflix

A longtime (former) employee details the company's tremendous rise to the top.

Few businesses have grown as quickly and efficiently as Netflix. The company obliterated its initial chief rival, Blockbuster Video, despite Blockbuster's market saturation and well-known brand. And although the streaming giant already boasts a high number of subscribers, it continues an impressive rate of growth.

Perhaps most telling, though, is the fact that the company name has become a standard part of English vocabulary. (Netflix and chill, anyone?)

So how did they do it? And more importantly, how can you copy their success?

That was the subject of Barry Enderwick's LinkedIn post "How to Copy Netflix," published earlier this week. Enderwick worked in marketing for Netflix for 11 years and was a part of the team that helped transform Netflix from a company that delivered DVDs into the largest streaming service in the world. His original post is well worth a read if you have the time (It's lengthy, with a word count over 3,500).

I've summarized the points I enjoyed the most, with a few of my own thoughts sprinkled in.

What lessons can your business learn from Netflix? Here are five:

1. Maintain bias to action.

Enderwick recounts how Netflix began as a portal that also rented and sold DVDs one at a time. Recognizing that this business model was highly replicable, the company switched to a subscription model that allowed a customer to rent a specific amount of DVDs per month for a fee.

That lasted six months.

Based on data, Netflix realized that customers really wanted an unlimited subscription model. The company made the switch and never looked back.

As Enderwick explains:

"In making the strategic shift they not only found product/market fit but also counter-positioned themselves to every competitor in the DVD rental market. If any competitor at the time tried to adopt the subscription model for renting DVDs it would have severely damaged their core business. Of course, it didn't hurt that the main competitor, Blockbuster, dismissed the business model as a niche."

Takeaway: Don't be afraid to change strategies to find the one that works. Doing so not only provides long-term direction but can give you a competitive advantage.

2. See the big picture.

When Enderwick began at Netflix, the brand position was "The best way to rent DVDs." But the company lacked an understanding of what it really needed to offer the consumer in order to move forward.

How did Netflix adapt? Enderwick continues:

"Around 2004 we conducted research, distilled it down, and came to the [brand] position, 'Movie enjoyment made easy.' From that point on, everything had to pay off that position. It was the research-driven foundation we needed to not only continue to create marketing messaging but align how we thought about features, envelope designs, etc."

Whenever Netflix executives made decisions, they could simply ask: Will this make enjoying movies easier for the consumer?

3. Read and react to market shifts.

Until 2004, the Netflix strategy was to become the world's biggest DVD company. But internet speeds were increasing dramatically, and no one could ignore the fact that streaming would eventually be the best way to deliver entertainment.

"But streaming lowered the barriers to entry for competition. So, our strategy shifted to 'get big on DVD, then transition to streaming.' The idea being that we create momentum such that by the time competition showed up we would already have a huge installed base of customers. Remember, this was a full four years before we would even launch the very sparse library of titles as a free add-on to the beloved DVD-by-Mail service."

Takeaway: Mike Tyson once famously said, "Everyone has a plan. Until they get punched in the mouth."

No one can predict the future, but you can learn to anticipate market changes, react quickly, and not settle for short-term gains that sink long-term goals.

4. Don't be afraid to reverse a decision.

At one point, Netflix built its own branded streaming device, similar to the Roku. Enderwick called it "a done deal"; the company was already shooting promotional videos.

But the Netflix team couldn't shake the feeling that they might shoot themselves in the foot with this little black box. Did Netflix really want to compete with all the other hardware players out there?

Instead, the company decided that not having hardware aligned better with their strategy--having Netflix on every device on the planet that's capable of connecting to the Internet. It would help them to convince brands like Samsung, Microsoft, and Sony to include Netflix on all of their devices, giving them "first mover advantage" and "a tremendous head start on the competition."

"The decision to stop something we had spent so much time and money on was not easy. But it was absolutely the right thing to do."

Takeaway: It might hurt to reverse a decision you've invested in, financially and emotionally. But if it's the best decision for your company, it's worth the pain.

5. Culture must be built from the ground up.

Chances are, you've heard of the Netflix Culture Slide Deck, which has become legendary in Silicon Valley.

The deck is an attempt to codify the "high performance" culture at Netflix, which the company admits is not for everyone. But others have lauded Netflix's attempt to strip away processes, empower employees, and trust them to make decisions as "responsible adults."

Enderwick credits culture for allowing employees at Netflix to thrive, and he commends CEO Reed Hastings and the executive team for spearheading the effort. But Enderwick also recognizes that Netflix culture is complex; you won't understand certain aspects without knowing other factors that have influenced them.

Takeaway: Culture isn't composed of written words. It's proved by actions. It must be lived by employees.

And it all starts with the leadership team.

Putting it all together.

There are many other insights in Enderwick's piece, including why Netflix's foray into original content was so brilliant, including the role it will play in expanding internationally. Also interesting is why Netflix eventually decided to permanently do away with all banner ads.

So why did Enderwick leave a company he so clearly holds in high favor? You guessed it--to found his own company, where he leverages the marketing and advertising lessons he's honed through the years.